A US Clothing Brand On the Existential Threat From the Tariffs
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There's no business like small business. Hiscox Small Business Insurance. Bloomberg Audio Studios. Podcasts. Radio. News. Hello and welcome to another episode of the OddLots Podcast. I'm Traci Alloway. And I'm Joe Weisenthal. Joe, we've been inadvertently doing a tariff series basically on what the trade restrictions mean for a bunch of different industries. Yeah.

So funny. I read your mind. Yes, it's like we have to go down the list. There's actually, it's impossible. You know, every industry is going to be affected by tariffs a different way. And there's this temptation like, okay, let's just talk to someone from literally every single industry. Today on May 7th, we released an episode talking about the video game industry. But yes, we could go down the line of every category within GDP and learn something. Video games, lentils. Yes.

The important stuff. No. So when we're talking about tariffs, I think one of the really big industries that is obviously going to get impacted has to be clothing and textiles. Right. So we know places like China, Vietnam, Sri Lanka, Bangladesh are huge textile exporters. And so we should talk about that and what it actually is like if you're running a clothing business in the U.S. to source textiles from abroad. Right.

You know, it's funny. I was at some event for my school and I ran into a fellow dad or for my kid's school and I ran into a fellow dad with a clothing company like two days after the initial tariffs were revealed in early April. He was talking about he was going to

add a button on his website. He made some sort of athletic gear talking about like, this is the pre and post tariff price. He was talking about how it might make sense in certain circumstances to move some of his manufacturing outside the U.S., especially what he sells to non-U.S. customers. So much in textiles specifically. The other thing about textiles, of course, is when people think about the China shock

That's one of the first categories that comes to mind, the fact that the U.S. used to have a booming textile industry, particularly in the Southeast, as we know. Yeah, we visited the remnants of the American textile industry in North Carolina. So there's a lot there. Yep.

All right. Well, I am very pleased to say we do, in fact, have the perfect guest. I have to do a disclaimer up top because this guest is a longtime friend of mine. We actually went to high school together in Tokyo and she started her own clothing company. And I was involved at the very beginning doing product testing and caveats.

I have a lot of their clothes. I have dresses that are, I think at this point are like 10 years old, but they still look amazing. So I am a big fan of this company. That is my disclaimer. Wait, Tracy, did you ever do any modeling? Yes. I thought you, did you ever do any modeling for this company? No. Okay. No, no, no. We can talk about that later. I did modeling when I was like 17 in Tokyo where the standards are arguably a lot lower. Anyway. Okay.

I am very pleased to say we're going to be speaking with Sarah LaFleur. She is the founder and CEO of M.M. LaFleur. So, Sarah, thank you so much for coming on All Thoughts. Thank you for having me. It's a true honor. Sarah, what is your favorite Tracy memory? And did you know she was going to be a star podcaster one day? I thought she was going to be the U.S. ambassador to the United Nations. So, yeah, I guess.

I guess. She was always a true intellectual. Oh, dear. Uh-huh. And I would say precocious beyond her years. So this is, yeah, that's probably fair. All right, Sarah, talk to us about the company. How would you describe M.M. LeFleur and when did you get started? Sure. So I started the company in 2013.

But with my two co-founders, I myself do not come from the fashion world. I actually worked in management consulting and then in private equity. You were at Bain, right? Yes, I was at Bain. And, you know, I always struggled to kind of find good, well-made, appropriate, but still very stylish professional women's clothing. Like I just thought there was a real dearth in the market. And...

I was never I'd never been in fashion. My mother actually worked in high end fashion. She would always bring home these like beautiful, you know, pieces of textiles and got these Chanel suits. And I was like, gosh, that's so beautiful. And that's what I'm going to wear when I grow up. And I'm a working woman. And lo and behold, I found out, you know, for for my budget, I was not going to be wearing a Chanel suit to work.

But the idea stayed with me. And basically, when I was 27, couldn't get into business school, didn't know what to do with my life. Private equity was not quite the right place for me. I was like, you know what? I've always thought this was a good idea. Let me go for it. So yeah, it's been, gosh, it's been almost 12 years. We launched in 2013. We're predominantly an e-commerce company, but we also have eight stores across

the country. And we also sell through wholesale. So what do you, we'll get into, you know, want to get into the nitty gritty of the business and the supply chain and so forth. But from a very big perspective, someone sees an ad for your clothes on Instagram, maybe they see a shirt or a jacket or pants that they like. Where was it designed? Where did the materials

come from and how did it, who put it together and how do they get to the end shopper? Yeah, great question. So we are all designed in New York City. Our offices are, you know, in the financial district, actually. And it's my creative director who usually you start with fabric, with collections. I think this is like a little known fact. People always think you sketch first and then you find the fabrics, right? Oh.

But it's really so much of fashion is really led by the fabric and textile industry. So you, you know, often you go to these fabric shows or these fabric mills come to you. You're inspired by different fabrications. And then you take that and you say, OK, what am I going to design into this? Maybe it's a jacket. Maybe it's a shirt. What have you?

And then from there, the designer sketches and then the pattern maker, very important person, I call, you know, this person is like the architect of the clothing, will actually then say, okay, in order for this dress, let's say, to come to life, here's how the fabric needs to be laid out on a piece of, you know, on a piece of fabric and cut. Yeah.

and then put together. Different companies do different things, but if you are working with a factory overseas, then oftentimes you will then send the pattern overseas to the factory. The factory will do the first what we call fit sample that gets sent back to New York. You fit it in New York with your fit model, and depending on whether you're

a brand that spends a lot of money on product development or not, you might do one, two, even up to three fit samples before you ultimately go into production in the factory overseas. Wow. Okay. So given the importance of the fabric in the design process, talk to us a little bit more about how you actually source that because it's,

The fabrics that you use are also a big differentiator for you, right? You have very special fabrics. And again, I'm going to sound like I'm doing an ad for this company. We love that. But I mean, they're great fabrics for workwear. They really are. And they're sort of specially made, is my understanding, to...

for exactly that scenario. - Yeah, we really focus on machine washability and wrinkle resistance. So Japan is great with that. It's not your mother's polyester. Synthetic fibers have really come a long way. So there are a lot of synthetic fibers that behave like silk or look like silk, but are still machine washable, wrinkle resistant. But we also love natural fibers. And natural fibers, places that are good at that historically are when it comes to wool, Italy, Germany. When it comes to silk, China.

China is really one of the few countries now left in the world that still actually does silk. Same for wool and cashmere. You know, if you if you want to do alpaca wool, alpaca, like you could still go to Peru. There are other places. But when it comes to most wool, most cashmere, I would say it's China. You could go to Mongolia for cashmere. But there aren't that many places across the world that that do these natural fibers.

For the types of sort of high-end, stylish clothes that you sell, where are the big manufacturing hubs right now? And where do you like – explain the link. Okay, there might be some textile company that's really good at advanced synthetics in Japan. I know that well because I buy all my clothes from Uniqlo and they never wrinkle, which is really nice because I'm very lazy. But then talk to us about like, okay –

What is the process from getting the textiles to wherever they're actually cut and assembled? Yeah, great question. Some factories are vertically integrated, meaning they both make the fabrics or they have a partner from whom they source the fabrics, and then they produce the actual clothing at their factories. I would say generally, although not always, lower-priced products are made this way.

For us, we like to nominate our fabrics. That's the word that's used in the industry, meaning we are specifying where the fabric should come from, what we want it to be, and which mill we want it to come from. And then the factory, which is often in a different country, they usually are not in the same country, takes on that fabric from that mill and then cuts it and produces it. So often...

Though not always, the two things, the fabric mill and the factory, are two different companies in two different countries. So how do you find factories and mills to work with? And I guess a question as a startup founder, what was your first experience actually finding a factory slash mill actually like? Well, yeah.

I think I prefaced earlier that I never worked in fashion. And so literally, I contacted the New York City, I think, you know, I was an economic development corporation. And for a lot of fashion designers, right, who are trying to get their foot in the door and start their own line, the garment district in

in New York City is amazing. And I would say, I mean, when I got started a decade ago, it was, I mean, yes, a declining industry, but definitely more bustling than it was now. And there was...

a directory of factories that you could contact. And but I mean, it was kind of laughable because a lot of these factories, A, don't use email. I think they they may have a phone which they may pick up if it's a good day.

Really, these factories, the way you get in the door is by knowing somebody who's worked with them. And even then, they may not be willing to take you on. It's a huge risk for them. A, can this designer actually pay for whatever it is that I'm going to do? And B, is this designer actually going to be around a year from now? Because fashion, people come and go so fast. And so unless it's through a connection or a referral or you're somewhat established, it's

It's really hard to get your foot in the door. I mean, I was begging people to take my orders when we first got started and we were doing manufacturing in the garment district. Oh, you're doing manufacturing in the garment district. This was this was a decade ago. But yeah. And here we have a specimen from the early 2000s, a legacy investing platform.

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So today, if you want to go to a factory somewhere in Asia and you have the textiles, what are like some of the minimums? You know, like what's a minimum run? Because I have to – like you said, you know, they want to know that you're still going to be around from now. They have to allocate capacity. They presumably don't want to just allocate a little capacity and then have to change. Talk to us about like what you have to bring to the table today.

from a volume standpoint, in terms of a reliability standpoint, in terms of a dollar standpoint, such that it's worth taking you in the door? There's...

huge variability in both factories within one country and then from country to country. Right. So I would say China, once upon a time, probably the MOQs, the minimum order quantities, were north of a thousand easily. But now as wages in China have gone up,

A lot of factories that we work with are willing to do MOQs as low as 100. There might be a surcharge for it. Wait, why is the lower volume... Why are they willing to take lower volume as wages have gone up? Because...

And brands have moved to other places like Bangladesh, places in northern Africa. I mean, it is I don't want to say it's a race to the bottom, but it is in many ways, you know, as labor prices rise, brands are always saying like, OK, well, I got to go cheaper. I got to go cheaper.

Oh, interesting. So they, you know, first went to Southeast Asia. They moved over to South Asia, you know, India, Bangladesh still does a lot of, you know, units where they need a thousand, two thousand, sometimes north of ten thousand units. And then also Northern Africa is now kind of considered the next frontier. Huh.

Tracy, this is interesting. You know, one of the things I've seen a couple of people talk about is like China experiencing its own China shock because some of these low-end textiles, those legacy operations are now competing with cheaper wage countries the same way textile companies in the U.S. were competing with other Asian countries. Yeah, absolutely. Okay. So, Sarah, we got to get to the meat of this discussion, I guess. Let's talk about the tariffs. So when I...

When I asked you about this issue, you said that tariffs were all you've been thinking about for basically the past month. Yes. And even that feels like an understatement. I think I dream about it. I mean, it has been so detrimental to the business. It's not like running a fashion business in 2025 was a cakewalk, right? It's already an incredibly competitive business with razor-thin margins.

We're dealing with pressures on the marketing side from, you know, Meta and Google. Oh, yeah. Right? I mean, we just went through the pandemic where I had to close all 11 of my stores and then gradually open them back up again to the point where now we have eight. I mean, it was...

It was devastating going through the pandemic. And we survived by the skin of our teeth. We've made it through the other end. We had just finished budgeting for 2025. And I think, you know, this will probably be not a total surprise being that I'm a New Yorker. But, you know, we're saying, OK, when Kamala Harris didn't get elected, we were like, well,

Everyone says Trump's going to be good for business. We have a big business in Washington, D.C. Change of administration is usually also good for our business. Oh, yeah. The first thing we came, you know, ran...

across was the doge cuts. So our two DC stores are down about 20 to 25 percent from L.Y. All of our customers that come in are either have been laid off or are nervous that they are going to get laid off or that they're going to have they're going to be some repercussions. So we were already feeling those effects going into March. I still remember the moment of the what was it?

Liberation Day. April 2nd. Yeah. Yes. I was sitting in my office. We were doing a meeting and my phone blew up. I'm on, you know, various text chains with other fashion founders and CEOs. And they're saying, have you seen the numbers? And, you know, I mean, just that's all we could focus on. You are one of the people squinting at the billboard. We were. And I was like, someone get a screenshot of this. Yeah.

Anyway, the numbers were kind of beyond, I think, what anyone of us expected. And I remember I was actually in China, Hong Kong, in Vietnam, where a lot of our partners were or are in November. And we were all talking about how bad do you think it's going to be? And one of my partners was like, you know, I don't think it can be that bad because I

where else are you going to get your silk? I mean, where else are you going to get your silk? So I predict 10%. It can't be higher than 10%. And then when we saw the 54% on top of the 30% we were already encountering, we were like, well, that's just insane. And then it just got worse and worse and worse. I mean, I'll tell you, between Liberation Day, April 2nd, and then April 11th, we were on calls with our factories like night and day. I don't think my factory partners slept for those seven days.

You know, any hour of any day we could reach them. And we were just basically saying, get it on the boat, get it on the boat. Except it was total chaos at the ports. So it's just like, you know, after 48, 72 hours, it was like we couldn't even secure a space on the boat. And like the night before, it's all about to go down. You know, I'm on a call with one of my partners in Hong Kong and I'm like, did you get it on the boat?

boat and he was like no I couldn't get this on the boat and then I was like okay then don't put it on the boat and then you know and then whenever I can't even remember the exact timeline now but whenever you know we went into whenever it we went into like the 90 day grace period I was like get it get it on the boat get it on the boat I mean it just felt like it just

It just felt like, I hate to use this metaphor, but it's like the last ship or the last helicopter out of Saigon and everyone's just trying to get their things on. Yeah, I mean, it's an okay metaphor because one, that's the helicopter, but it's still coming out of Vietnam. But actually, what is... So right now, we're recording this May 7th. I guess two questions is like, what is your sort of geographical exposure? Because ex-China, it's only 10%. And...

And it may get, I think, you know, a lot of people think that will get, even if there's no deals, that that 10% will get extended. What is your current geographical exposures to the 10% and 154%? Well, I had to cancel 50% of my May collection because they were all from China. Okay. Many of the things were late because they were coming out of places like Vietnam. Okay.

where it was initially hit with the 54% and we were saying, oh, I'm sorry, it was 47%. We said, don't ship it. Oh, so even though those got put back to 10% fairly quickly, it created a hiccup. Totally, because it's like fashion, it's all about...

your selling window, right? And you bring in your summer clothes and you want to sell through most of it within six weeks. And if you miss that selling window, well then we'll wait till next year. And so some of our products are going to be held for a whole year and they're going to wait for summer 2026 to be released.

I mean, this is just I chalk it up to bad luck, but we actually we have partners in Turkey. We have partners in Portugal, China and Vietnam. But by far, we do most of our production in China. Got it. And why is that? It's because the quality is exceptional. The prices are not cheap. You know, I have customers who because we've been really communicating transparently with our customers saying, you know, here are the consequences that we're facing.

And our customers are very sharp, intelligent women. And I've had many of them email me saying like, I'm really sorry to hear all this. I'm going to support your business. But why don't you move your production back to the US? Why don't you move it back to the garment district? And I'm like, I don't even know how to explain. That industry sucks.

is not only dying in many cases gone it could never support the kind of quantity that we want to do and by the way we're not even that big a business you know and and you know they sometimes i get like um i i i knew um i knew it was made in china because you know the qualities was xyz and i was like you know i was like have you ever seen the inside of a factory in china because i

You know, the workers who work there, they get free lunch. They have a farm at the factory where they make fresh vegetables and their lunch is served using those fresh vegetables. And they have these beautiful, beautiful dormitories. Like there is a lot that these Chinese factories do right to treat their workers right.

And meanwhile, the garment district, factories, everyone brings their own toilet paper because if they put toilet paper in the toilets, they will get stolen. Right? Like, everyone thinks, like, made in New York, beautiful, excellent quality, like, gorgeous.

Great labor regulation. It is not the case. You know, if it happens, it's very few factories that are very selective and very, very expensive. The truth is the American consumer does not want to spend that much on clothing as prices have gone up in every single other category. Clothing has remained relatively stable since the 1990s. And so...

So we can't have it both ways. You know, if you want to continue to buy clothing at the prices that we're used to, we have to have global trade.

Yeah. So you mentioned transparency with customers. Talk to us about how you're handling the pricing side of things at the moment. Are you are you going to put a little button that shows the pre tariff and post tariff price or something like that? I am so I'm so tempted to. But, you know, what I worry about is that she's just not going to buy it.

just transparently we've already done a round of cost cutting and from where I'm sitting I see recession on the horizon so I feel like

When I see recession coming, I don't know if I can also increase prices and expect customers to just eat it and get on board with it. So, you know, I'm getting my margins squeezed. We're looking at our August collection right now. My August collection, unfortunately, is 100 percent made in China. And we are making very serious tradeoffs about what we're willing to pay back.

big, big tariffs on and bring in versus what we're willing to let go. And also my factory partners like this clothing is already made. August has already been made. Yeah. So it's in a box ready to get on a boat.

And they're desperate because they've already put in their investment. So they're also negotiating with us saying, hey, if I were willing to reduce my prices by- Yeah, that's what I was wondering. To what degree are those conversations happening about the factory site eating the costs or giving you reductions? It's happening, I would say, across the board. They're saying like my goal right now is just really to be able to cover my costs.

And, you know, I was like, well, you know, I've been hearing these things about like the Chinese government doesn't want any of these factories to fail. Like, like, are they what's going to happen? Is there going to be a version of, you know, PPE, the PPE loan in China? Like, how how how are you guys going to survive? They're saying I think they're going to pump more money into the banks, but none of this money is directly coming to the factories like they're fighting for their survival, too.

What are the other levers that the factories can pull to try to offset some of the impact? So, you know, maybe offer discounts to clients, but is there anything else they can do to sort of deal with this situation? One of my factory partners actually wants to launch M.M. LeFleur in China. Oh. He was like, hey, I'm going to be stuck with all this inventory forever.

What do you think about M.M. Le Fleur for the Chinese market? And I was like, go for it. Like, I've always wanted to do it. It's not it's not as though, you know, so like, I don't know, from from great challenges could come opportunities, but it's a long shot. I mean, and so we're also looking at that as well. And he's saying, send me all the product that's going to be stuck in China and let's see if we can actually launch M.M. Le Fleur China. So, yeah.

It's not as though, you know, they're not, you know, they're also thinking of every creative solution possible. We're firing on all cylinders. And then, of course, like there's the country washing that's happening. I know. I know that we're very careful about it and trying to make sure it doesn't happen. But this is the idea of moving production elsewhere. Totally. And I should say, like, finished product elsewhere. Right. This is right. So it's not the production. It's basically lying. It's exactly it's the product is finished. Send it to a third country. Right.

switch out the label and ship it to the United States. I've got three kids, so I can't end up in prison. But I know for a fact that it happens and it'll probably happen a lot. And God,

Gosh, I mean, I'm sure the government will make an example out of a few of them, but it's going to be impossible to trace all of them. So that's going to be... That's definitely going to happen across the board. Joe, there is an irony in the idea that, like, okay, Chinese consumers could end up having more clothing choices in the form of an M.M. Le Fleur store in Beijing or something like that. And meanwhile, you know...

that clothing available to American consumers is potentially shrinking. Well, it's, you know, I was actually talking to someone this morning and they were like, yeah, inflationary in the U.S. and disinflationary everywhere else in the world because of this sort of blood of goods. Yeah, the U.S. is the one exporting deflation now. Yeah, that's right. It's actually kind of strange. The factories that you work with in China...

What have they done either in recent years or when they look to the future about bringing their know-how and capacity to other Asian countries so that it actually is manufactured in Vietnam? And how much capacity and work is being done on those fronts? Yeah. I mean, I think even from the last Trump administration, a lot of Chinese factories kind of saw the writing on the wall. And so they were diversifying their sources. And so

I have some factory partners that have opened up factories in Vietnam, in the Philippines. And I mean, it's kind of fascinating because all the workers will be Vietnamese, but the, you know, the kind of leaders in the factory are all from Hong Kong. And even that is tough. Like, I think one thing that's like not understood about

garment manufacturing is it's a real trade and your best sewers are people who have been doing this for decades you know like you're you're a baby sewer if you've only been doing this for like five to ten years.

The people who make your samples, you know, your best sewing. And this is another reason why it's fantasy, the idea that this can all be done in the U.S. Oh my gosh. Do you even know how to use a sewing machine? I don't. I just bought a sewing machine. I'm going to use it for the first time tonight. I'm very excited and nervous. Great. There you go. Those are most Americans, you know, very intellectual. They might know how to code, but they don't know the first thing about how to use a sewing machine. And they're like, bring garment manufacturing back to America. And I was like...

People don't know how to sew a button on. They bring it to the dry cleaners. In what world is garment manufacturing actually going to come back? So it's kind of preposterous to imagine that that's a future. And therefore, it's even slow at the level of quality that you expect for your clothes. It's not trivial to have those skills and

And capacity emerge in a Cambodia or a Vietnam. Oh, my gosh. Yes. OK, so like let me go back to silk, right, because silk is silk is a very hard material. First of all, you need to start with like the mulberry trees and the silkworms. Right. And I mean, creating silk is a very long supply chain and a very difficult supply chain. Right.

China is one of the few countries that actually do it. And then sewing silk, silk is super slippery, right? Like that's kind of you can make sense of it. Like trying to sew silk in a sewing machine takes a really skilled hand. So, you know, China is the only place where we do silk. And we literally don't have another country to move silk to. Like we're saying like maybe the Philippines can take it if it's owned by a Chinese factory. Like,

We're desperately looking for a new silk factory. I mean, I say to all people who shop for Christmas and Hanukkah, like, buy your silk now because you're not going to see it for a while. You know what's great about your investment account with the big guys? It's actually a time machine. Log in and Zoom. Welcome back to 1999. It's time for an upgrade.

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You mentioned earlier that you see recession on the horizon. Talk to us about why you think that and then also like how useful or how accurate has the clothing business been in predicting previous recessions? I know, well, you've only been in existence for 10 years or so, 12 years maybe. So there aren't that many examples. But I imagine like at this point you have some experience.

Well, it feels – I was just at like a retail industry dinner and they were joking like every year is a new black swan event. And I was like, yes, I do really feel that way from the pandemic to Silicon Valley Bank going under to actually one of our other lenders also went under and now this.

Oh, SVB was a lender for you? Yes. We banked with SVB. It was, yeah, you know, 72 hours that I never hope to experience again. But I think what this is, I consider myself an optimist, right? Like, why else would I be an entrepreneur and, you know, be foolish enough to think that we are the 1% that will somehow make it through?

And yet all these experiences over the past five years, I mean, they have hardened me. I've definitely become significantly more conservative in all of my predictions and forecasting. And basically, you know, yes, everyone's saying like, oh, don't worry, tariffs going to come down again. Like, you know, Trump's not going to actually do it like they're going to call his bluff. And I was like, it doesn't matter. The damage has been done. Like, I've already cut my costs. Like,

Maybe he'll undo it, but then who's to say he won't do it again? And so I've clamped down on every expenditure possible. So on this note, you said April 2nd, you had just finished your business plan. How do you actually incorporate this type of uncertainty into planning and hard numbers? It's really hard. And by the way, because I still don't actually know how much inventory we're going to receipt for the rest of the year, right? Right.

I went as conservatively as I thought I could without breaking the business. And, you know, when we're talking about cutting costs, like there's no, you know, people use the expression like cut fat, like there's no fat left to cut. Like I'm cutting into the muscle. But, you know, survival is the name of the game. So that's what we're going through. This isn't specifically tariff related, but since you mentioned it in the earlier in the episode, I'm curious, what are you seeing on the...

The digital channel side, you mentioned, you know, fighting for eyeballs or selling through meta and all these platforms. What's the what's happening there that you're seeing?

Well, we got in really early into the Facebook game. Yeah. I guess this was like we started advertising in 2013, 2014. And like, gosh, those were the those were the heydays. Right. And we could acquire customers for $13, which just like for context, I think now it's about $250. Wow. That's that's probably understating it. It is ridiculous.

massively expensive and yet probably still the most effective, right? And I think the lack of competition there is a real problem. Like we've tried Reddit to mix to success. We've tried TikTok to make success. You know, actually, another quick question. This is something I've wondered about. I don't... Many of the clothes that I buy, like...

it's because I won't buy through Instagram or even buy online, but I'll like see something that gets flashed to me on Instagram and then I'll like, oh, that's a nice shirt or whatever. When Instagram launched its

inside shopping where you could launch a store in Instagram. I was like, oh, this is a great idea. Just like press a button, use Apple Pay, and then I'll get it. And my understanding is it hasn't taken off and that actually there is not a lot of in-app shopping still in Instagram. Do you have any insight into that? We have not had as much success with that, but our price point's also higher. So I can't really, you know, I think if you're like,

buying a $9 hair clip, I'm guilty as charged. I think there's more success there. I think for something that's sitting at our price point, it's still, yeah, I'm not going to see instant conversion, but it's exactly what you said. Your clothing is not an impulse buy, for sure. I have impulse bought off Instagram and ended up with some strange products. I know. Gosh, and they keep on mounting. Yeah, yeah. I guess I will just say,

I think as small business owners, we can do everything right. And I think a lot of us won't make it. That's the truth. A lot of us will be out of business within the next six to nine months. And I think the consumer doesn't really understand that. I think actually...

Even people who are in retail who are one layer removed don't understand that. I was chatting with an executive of a department store and he was like, well, actually, sales have been great because everyone's rushing to get stuff. And like, I'm sure people will work it out for the holidays. And I don't know if people really understand how dire it is, you know. And yes, OK, like Trump's talking about you're going to get two stuffed animals instead of 19 stuffed animals. I'm like, you're getting zero. Yeah. Yeah.

So my kids have enough. I mean, I know. Same thought here. But small businesses won't make it. The big businesses will be fine. Like, gosh, iPhones. No tariff rate. What about actually like a really big mass clothing line that's not as sort of nice and high quality? Like when you when you think about like

a slightly cheaper, much larger competitor of yours. I don't know the names. Maybe the two of you can think of a better analog than my... J.Crew, maybe? Yeah, or something like that. Like, what do they... You know, they just eat some of the costs and they have distributors that can... They have enough scale that they can force their producers to eat costs and just sort of, you know, trudge along. You know, I think for those retailers that have enough cash on the balance sheet, maybe it's a...

a risk they're willing to take. I think the other thing that's not understood necessarily about the tariffs is that you pay tariffs to the government basically as soon as the goods hit

the U.S. territory, right? A customs official comes and looks at it and says, basically, here's your invoice. Pay it up, right? And you don't get your 30-day terms or your 60-day terms that your factories extend to you because that's actually the selling window that you need to sell your products to your customers. So it's actually a huge cash flow problem as well. And you're bringing in these goods in not knowing actually if your customer is willing to eat the price hike. So again, it's a gamble. Big,

Big apparel companies with huge cash, lots of cash on their balance sheets. Yes, they will probably stomach it. If you're a factory seller to a small entity in the U.S., you may be reluctant to just let it ship there because you actually don't know whether that customer is going to be able to take delivery and pay at the very end.

very honest. Yeah, I think that's a real consequence. That's a real consequence, but I think they're fighting for their survival too. They're going to take something rather than nothing. Yeah. All right, Sarah LaFleur, it was so good catching up. I wish it was under better circumstances, but I'm glad we finally did it. Thank you. This was a blast. Thank you guys. Thank you so much. That was fantastic. Thank you.

Joe, that was so fascinating. And I am really glad we finally had Sarah on. It is kind of the perfect moment to talk about the textile clothing business. I hadn't thought of the cash flow issue of actually paying the customs. I mean, obviously, I knew that companies have to pay the tariffs as things actually come in at the ports. But the issue of like,

the discrepancy between your selling window and when you actually have to pay that extra tax. Yeah. I hadn't thought of that. No, there's all sorts of... I mean, there's all sorts of wrinkles, no pun intended, that the tariffs are creating. I really liked that episode because...

Look, we can talk to economists all day long about shortages coming or higher prices. So it's helpful to hear from someone in business. A business actually dealing with it. Actually, yes. All those things that economists are talking about are very real. You know, so much in there that was interesting, you know, starting on that last point that you mentioned, you know, again, a big retailer like a J.Crew store.

They're going to have an easier time sort of smoothing out their cash flows, taking a risk, making a bet, ordering a line than a company that's just quarter to quarter for its survival. This seems to be a recurring theme in a lot of these tariff episodes, right? So we heard it in the gaming industry episode. The smaller players seem like they're suffering or will suffer a lot more than the big guys. And then when we spoke to the lentil king of Saskatchewan,

He seemed, you know, he was kind of sanguine about the whole thing, I guess, because he's the biggest lentil player out there. Yes. And the fact that it sounds like for ag, the idea of like small ag has sort of been disappearing for a while. I mean, what do you say? He's at a family farm at this point in Saskatchewan means having 300,000 acres, which is not...

My conception of a little family farm. But then also, obviously, I guess I was surprised a little bit that there isn't more capacity or market depth in some of these non-China countries like a Vietnam, like a Philippines, like a Cambodia, so forth.

for the types of sewing and cutting that's necessary at this level. And so even at this point, for something like clothes, and granted, Sarah makes nice high-end clothes that is sort of still China or nowhere. Yeah. And I guess...

this is the other theme that keeps coming through, that it's just going to be very, very hard slash impossible to try to build up that capacity and expertise in the U.S. And there's no way anyone's going to open like

I don't know, start growing mulberry trees and farming silkworms in the next six months or something like that. So, yeah, buying your silk now for Christmas. Useful bit of advice. Yes. All right. Shall we leave it there? Let nobody say that there is not useful advice on Oddlot. That's right. Shall we leave it there?

Let's leave it there. This has been another episode of the Odd Lots podcast. I'm Traci Allaway. You can follow me at Traci Allaway. And I'm Joe Wiesenthal. You can follow me at The Stalwart. Follow Sarah LaFleur. She's at SM LaFleur. Follow our producers, Carmen Rodriguez at Carmen Arman, Dashiell Bennett at Dashbot, and Kale Brooks at Kale Brooks. For more Odd Lots content, go to Bloomberg.com slash Odd Lots, where we have a daily newsletter and all of our episodes.

And you can you should check out our Discord where people are talking about these topics 24-7. That's discord.gg slash oddlots. And if you enjoy Oddlots, if you like it when we talk to actual businesses that are dealing with the tariffs right now, then please leave us a post.

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